Embecta Corp.

Please stand by. Welcome, ladies and gentlemen, to Invecta Corp's fiscal fourth quarter 2025 earnings conference call. At this time, all participants are in a listening mode. Please note that this conference call is being recorded, and a replay will be available in the company's website following the call. I would now like to hand the conference call over to your host today, Mr. Pravesh Kandilwal, Vice President of Investor Relations. Mr. Kandilwal, please go ahead.

Thank you, Operator. Good morning, everyone. and welcome to MBECTA's Fiscal Fourth Quarter 2025 Earnings Conference Call. The press release and slides to accompany today's call and webcast replay details are available on the Investor Relations section of the company's website at www.mbecta.com. With me today are Dev Kodekar, MBECTA's President and Chief Executive Officer, and Jake Alguiz, our Chief Financial Officer. Before we begin, I would like to remind you that some of the matters discussed in the conference call will contain forward-looking statements regarding future events as outlined in our slides. Such statements are in fact forward-looking in nature and are subject to risk and uncertainties, and actual events or results may differ materially. The factors that could cause actual results or events to differ materially include, but are not limited to, factors referenced in our press release today, as well as our filings with the SEC, which can be accessed on our website. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in our press release and conference call presentation. Our agenda for today's call is as follows. Deb will begin with an overview of Empecta's fiscal year 2025 performance and discuss progress across our strategic priorities. Jake will then review the financial results for the fourth quarter and full year 2025 and share our preliminary thoughts for fiscal year 2026. Following these updates, we will open the call for questions. With that said, I would now like to turn the call over to our CEO, Deb Kodiker.

Good morning, and thank you for taking the time to join us. During fiscal year 2025, we achieved several key milestones. We made the decision to end our platform program, and we executed a restructuring plan aimed at enhancing our profitability and free cash flow. We completed the implementation of our own ERP system and operationalized a new distribution network and shared service capabilities in Latin America and India. marking the completion of a major, complex, multi-year standard program. With this, 100% of our revenue now flows through our systems, and all TSAs and LSAs that we had at SPIN have been exited. We substantially completed our brand transition efforts in North America, with more than 95% of our U.S. and Canadian revenue now converted to the Empecta brand. This was carefully managed to ensure continuity for customers and patients. And with this foundation in place, we have now commenced the next phase of the initiative globally. Transition activities have already begun in certain international markets, and we expect to be significantly complete in most regions by the end of calendar year 2026. Together, the completion of these separation and stand-up activities have freed up capacity which we are now devoting to initiatives that we anticipate will help transition the company towards long-term sustainable growth. Supporting this goal, we advanced our GLP-1 strategy meaningfully during fiscal 2025. We are now collaborating with more than 30 pharmaceutical partners to co-package our pen needles with generic GLP-1 therapies. Several of these partners have already signed agreements and placed purchase orders. and our products are included in multiple GLP-1 partner-managed regulatory submissions expected to lead to commercial launches. Our generic GLP-1 partners are anticipating launches in Canada, Brazil, and India during calendar year 2026. And while we do not control the timing and content of the company's regulatory submissions, nor the timing of their launches upon receiving regulatory approval, we are encouraged by their momentum and remain ready to support our partners by providing them with our pen needles. In parallel, we are continuing to expand the availability of pen needles in consumer-friendly small packs for the Canadian and select European markets. These small packs are targeted specifically towards out-of-pocket customers like GLP-1 users. Taken together, We continue to believe that the use of our pen needles with GLP-1 represents at least a $100 million annual revenue opportunity by 2033, and we anticipate that this will be a growing contributor to our results over the next several years. We also initiated new product development programs for market-appropriate syringes and pen needles aimed at strengthening and expanding our portfolio with the goal to maintain our leadership position in our core product categories. These programs are important because we believe they will allow us to expand our reach into market segments that we do not significantly participate in. And we continue to prioritize financial discipline and debt reduction as throughout the year, we generated approximately $182 million in free cash flow and we paid down approximately $184 million of debt. exceeding our original fiscal year 2025 target of $110 million. With leverage now at 2.9 times net debt to adjusted EBITDA, we continue to create financial flexibility to invest in potential organic and inorganic opportunities that can reshape MBECTA's long-term growth profile. In summary, fiscal year 2025 was a year of solid execution on multiple fronts, while outlining and initiating a new strategic direction for the company. From the standpoint of our financial results, we exceeded our previously provided fiscal year 2025 adjusted gross margin, adjusted operating margin, and adjusted EBITDA margin ranges. While our adjusted diluted earnings per share was at the top end of our previously provided guidance range. As we move into fiscal year 2026, We've remained focused on the priorities and the long-term financial targets outlined at our 2025 analyst and investor day. Now, let's review our revenue performance for the fourth quarter and full year. During the fourth quarter of fiscal year 2025, MBECA generated $264 million in revenue, reflecting a 7.7% decline year-over-year on an as-reported basis, or a 10.4% decline on an adjusted constant currency basis. Within the U.S., revenue for the quarter totaled $142 million, reflecting a year-over-year decline of 15.2% on an adjusted constant currency basis. The year-over-year decline was primarily driven by an unfavorable comparison to the prior year fiscal fourth quarter, which benefited from additional distributor orders that occurred because of the then looming U.S. port strike totaling approximately $10 million, as well as the unwinding of the favorable order timing associated with the July 4th holiday that positively impacted our third quarter of 2025 results, totaling approximately $7 million. Additionally, year-over-year price in the U.S. was unfavorable by approximately $7 million, primarily due to milestone payments made to a large U.S. pharmacy customer. Turning to our international business, revenue for the fourth quarter totaled $122 million, representing an increase of 2.8% on a reported basis, but a decline of 4% on an adjusted constant currency basis. This decline was anticipated and primarily due to lower volumes and year-over-year pricing headwinds within China. This was driven by heightened competitive intensity in China, fueled by the growing preference of local Chinese brands, amidst an evolving U.S.-China geopolitical and trade environment. This was partially offset by performance in other emerging markets. While from a product family perspective, during the quarter, adjusted constant currency pen needle revenue declined approximately 13.9%, syringe declined by approximately 4.5%, safety products grew approximately 3.7%, and contract manufacturing revenue grew approximately 8.5%. The year-over-year decline in pen needle revenue was driven by the same factors that impacted our U.S. and international results. Turning to our syringe products, the decrease was primarily due to ongoing end-market volume declines within the U.S. This trend is not new and has persisted over the past several years and is consistent with the decrease in prescriptions for insulin vials as compared with insulin 10. This decline was partially offset by improved pricing. Finally, our safety products grew 3.7%, primarily due to improved pricing. For the full year, MBECTA generated adjusted revenues of approximately 1 billion and 80 million, which represented a decline of 3.9% on an adjusted constant currency basis. U.S. revenues total $579.1 million, which is a decrease of 4.6% on an adjusted constant currency basis. The year-over-year decline in the U.S. was largely due to the aforementioned advanced distributor ordering that occurred in Q4 of fiscal 2024, associated with the potential port strike, as well as the continued end-market declines in syringe volumes. Meanwhile, international revenues totaled $501.3 million, which equated a year-over-year adjusted constant currency decline of approximately 3.1%. The decline in international revenue was primarily due to lower revenue contribution from China. Turning to our product family revenue performance. Globally, our pen needle revenue declined approximately 7.1%, totaling $784.1 million. Fiscal year 2025 Penn Needle revenue reflects the confluence of several transitory factors, including advanced distributor ordering in the prior year, lower China revenue, and pricing headwinds in certain markets. Turning to our syringe products, revenues grew year-over-year by 1.7%, primarily driven by improved pricing. While our safety products grew 6.3%, due to a combination of improved pricing and volume increases. Lastly, contract manufacturing revenue grew approximately 53.9% as compared to the prior year. With that, let me turn the call over to Jake for him to review other financial highlights, as well as to provide our preliminary financial guidance for fiscal year 2026.